Perhaps you have noticed that the recent “dual control of energy consumption” policy of the Chinese government has had a certain impact on the production capacity of some manufacturing companies, and the delivery of orders in some industries has to be delayed.
China has been cracking down on high-energy consuming projects after 20 of its 30 provinces and regions failed to meet energy consumption targets in the first half of the year. The curbs have expanded to more than 10 provinces, including economic powerhouses Jiangsu, Zhejiang and Guangdong, the 21st Century Business Herald reported Friday. Several companies have reported the impacts of power curbs in filings on mainland stock exchanges.
Earlier this year, a giant 126 billion yuan ($19.6 billion) coal-chemical plant in northwest China's Shaanxi province was suspended after falling foul of energy consumption restrictions.
In a sign that economic considerations continue to prevail, though, the NDRC made it clear that important national projects would be exempt from local energy consumption controls.
China's near-term energy strategy is under careful scrutiny as international climate talks approach, with Beijing under pressure to do more to tackle coal consumption and bring its carbon emissions to a peak earlier than 2030.
The economy is at risk of a severe shortage of coal and gas — used to heat homes and power factories — this winter. It’s had to ration power in the colder months before but it’s never had to do it with global prices of these fuels at the levels they are now.
China’s heating coal futures have more than quadrupled in the past month, smashing new records over and over as concerns over mine safety and pollution constrain domestic output while it continues to ban shipments from top supplier Australia. Meanwhile, natural gas prices from Europe to Asia have surged to seasonal highs as countries try outbid each other for fast-depleting supplies.
The worsening power crunch in China — perhaps overshadowed by the attention on whether Evergrande will default on its mammoth debts — reflects extremely tight energy supply globally that’s already seen chaos engulf markets in Europe.
In previous winter power surges in China, many have turned to diesel generators to plug the shortages of power from the electricity grid. The year, the danger is government policies have further limited the energy industry’s potential to increase production to meet the demand increase, said Zeng Hao, chief expert at consultancy Shanxi Jinzheng Energy.
A number of smaller companies are also starting to inform the stock exchange they’ve been ordered to curb or halt activity. While they may be overlooked by major foreign investors that don’t cover these firms, the end result could be a shortage of everything from textiles to electronics components that could snarl supply chains and eat into the profits of a host of multinational companies.
In Jiangsu, a province near Shanghai with an economy almost as big as Canada’s, steel mills have closed and some cities are turning off street lights. In nearby Zhejiang, about 160 energy-intensive companies including textiles firms were shuttered. While in Liaoning in the far north, 14 cities have ordered emergency power cuts that were blamed partly on the surging coal prices.
“The power curbs will ripple through and impact global markets,” Nomura’s Ting said. “Very soon the global markets will feel the pinch of a shortage of supply from textiles, toys to machine parts.”
The curtailments are a fresh threat for an economy facing multiple pressures after a V-shaped rebound in the past year. And as with Europe’s energy ructions, the squeeze poses a challenge for policy makers: how to pursue environmental goals without damaging still-fragile economies. Beijing is targeting full-year growth of 6% after expansion of 12.7% in the first half.
In addition, because of these new policy in China, the production capacity in some industries may be further restricted.
To mitigate the impact of these restrictions, we recommend that you place an order as soon as possible. We will arrange production in advance to ensure that your order can be delivered on time.
If you have any questions, please contact us and we will respond to you as soon as possible.
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